SM, I thought I referred to thirds in that one. Well, the idea is simple. If I plan to buy 300 shares or a stock, or 30 options, I buy them one third at a time. When I think it is undervalued, I buy the first 100 shares. If it goes lower, I buy the second. And, if it gets wacked again, the last third. Same on the exit. I sell the first third when my undervalued stock hits the low end of its fair value range, the second third when it hits the top end and the last third when it is a bit overvalued.
This works for me in both stocks and options. In options, it is a way to conserve my cash when a stock is moving against me. With long stocks, it allows me to buy more at cheaper prices. Generally, the stocks I like or hate make such big moves that a one third or two third position does my entire portfolio just fine if it turns on a dime before I get a full position. |
